Design Within Reach: Strategic Analysis and Recommendations

Design Within Reach: Strategic Analysis and Recommendations

Emily Weiss

Advisor: Dr. Richard Linowes

Completed Spring 2011

University Honors in Business Administration

Kogod School of Business, BSBA in Accounting

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MEMORANDUM TO: John Edelman, CEO, President and Director, Design Within Reach

Theodore Upland III, CFO, Design Within Reach

John J. McPhee, COO, Design Within Reach

Glenn J. Krevlin, Managing Partner, Glenhill Capital Management

LLC, and Chairman, Board of Directors, Design Within Reach

CC: Professor Richard Linowes, American University

FROM: Emily Weiss, Strategy Consultant

DATE: May 2, 2011

RE: Strategic Analysis and Design Within Reach’s Next Steps

EXECUTIVE SUMMARY

In 2009, problems at Design Within Reach reached a critical mass. Under CEO

Ray Brunner, known more for his antics and wild management style than his success,

the company unraveled the close ties to the design world that had made it such a

successsince its founding in 1999. These issues, coupled with the burst of the housing

bubble, destroyed the company’s financial structure, and in 2009 DWR delisted from the

NASDAQ, to be purchased by Glenhill Capital, a private equity firm.

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CEO John Edelman replaced Brunner in the following months, and made some of

the key plays necessary to keep DWR afloat. But now that the crisis is over, Design

Within Reach has been slow to move on. While it may take years or decades for the

company to see the same sort of sales and buzz that marked the mid 2000s, I make the

following recommendations to keep the company moving, in order to remain a relevant

piece of the design world to which it owes it success:

1. Design Within Reach should institute a “no knockoff” policy for the products it

carries in its studios, catalogs and online.

2. The company should devote increased time and resources to the continued

evolution of the DWR online experience.

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TABLE OF CONTENTS

I. Background Page

a. Industry Analysis 5

b. Competitor Analysis 6

c. Company Analysis 7

II. Recommendations

a. “No Knockoff” Policy 10

b. Web Improvements 12

III. Appendices

a. Selected Financial Data 15

b. Financial Statements 16

c. SWOT Analysis 22

d. Example of Knockoffs 23

e. 111 Chairs Project 24

f. 2011 Studio Locations 26

g. The Studio Model 27

IV. Bibliography 29

5

BACKGROUND

Industry Analysis

The furniture and home furnishings industry saw sales of $109 billion in 2008

(Design Within Reach). As is expected, sales for the industry are very much tied to

consumer discretionary spending and the state of the housing market. The American

public’s interest in home design grew in the early and mid 2000s during the housing

market’s peak, and as television shows like TLC’s Trading Spaces and HGTV’s House

Hunters and Design Star gained popularity.

Design Within Reach operates in an upscale portion of the furnishings market,

whose customers are more willing to pay a premium for high quality products. These

customers are interested and willing to educate themselves on the modern design

movement, and on the stories behind the designers and individual products they are

buying (Design Within Reach).

Recently, the upscale furnishings industry has seen a trend towards

consolidation, as Americans abandon department stores for smaller specialty retailers,

leaving a small number of large scale retailers of Design Within Reach’s size (Design

Within Reach). Across the industry, but especially in the upscale market, there is also a

trend towards greater transparency in the sourcing of products, and a consequential

push towards American-made and sustainably manufactured goods. In addition,

retailers are being forced to make significant improvements to their online retailing in

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order to stay competitive, as customers make fewer and fewer purchases in store or by

catalog (Design Within Reach).

Competitor Analysis

Players in the residential and commercial furnishings market range from specialty

retailers, department stores, and large mass merchandisers and home furnishings

stores. For Design Within Reach, the main sources of competition include modern

design companies who sell by catalog and online, regional retailers who specialize in

modern design, national or multinational retailers including Crate & Barrel, Ethan Allen

Interiors, Inc, and Room & Board Inc., and manufactures whose products Design Within

Reach is authorized to sell, including Herman Miller, Inc. and Knoll, Inc. (Design Within

Reach).

Restoration Hardware, Inc. faced many of the same issues as Design Within

Reach in the mid-2000s. The company, which markets historical, 1920s-esque design,

had to revamp its strategies after a major decline in sales and consequent delisting

from the NASDAQ in late 2007, as they were purchased by a private equity firm

(Gahagan). The company was restructured, closing stores and refocusing its product

line, raising prices to set itself apart from more prominent, but less unique players like

Crate & Barrel and Pottery Barn (Gahagan). Restoration Hardware seized the new

opportunities that came with being privately-held firm, changed their product lines and

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focus, and reestablished themselves as a relevant, successful player on the furnishings

market.

While Restoration Hardware and Design Within Reach target customers with

different tastes, they target similar price points—and were faced with similar challenges.

Design Within Reach would be lucky to rebound in a way similar to Restoration

Hardware did in 2007 and 2008—having a rebirth that involved not just new

management behind the scenes, but new products and a new look altogether.

Company Analysis

Since its founding in 1999, Design Within Reach has occupied its own unique

space in the home and commercial furnishings market. Historically, classic modern

furniture designs like those by Charles and Ray Eames, Eero Saarinen and Herman

Miller were only available to licensed interior designers, and pieces took months to ship.

Ray Forbes, DWR’s founder, capitalized on the assumption that Americans were

interested in high design—or could be educated to be interested—and that they would

pay high prices for classics, especially if they could be ordered and received quickly.

Design Within Reach sells through three channels: its popular catalogs, online on

DWR.com and in its store locations—known as “studios.” Studios are located in

historical buildings in major design cities across the US, and offer customers the

opportunity to test-drive products before ordering (See Appendix G, “The Studio

Model”). All orders are shipped from DWR’s sole inventory warehouse in Hebron,

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Kentucky; originally the company operated under an “in stock and ready to ship”

premise—all orders were shipped within 48 hours.

The housing bubble of the early to mid 2000s helped the company grow at rapid

speed—their initial public offering in July 2004 only added to the buzz. At the time, the

company was valued at $211 million, 70 times their 2003 net earnings (Chu, “The Rise

and Fall…”).

After running into reporting issues with the NASDAQ and almost being forced to

delist in 2006, DWR’s board hired Ray Brunner, the company’s recently-retired real

estate chief, as the new CEO. Despite some initial financial success in his first year,

Brunner made a series of changes that contradicted many of DWR’s long-time

principles—extending shipping times under the premise that customers would be willing

to wait longer if it meant having slightly more options for colors or fabrics, pursuing

expensive brand extensions including DWR Tools for Living, DWR Bath and DWR

Kitchen, cutting catalog circulation by more than 50% to save costs, alienating

employees at headquarters by making “rash, crazy decisions” with a “mean, dictorial

and mercurial” management style (Chu, “New DWR CEO”), and alienating the design

world by selling brazenly knocked off products in order to make a quick buck for the

company.These issues, coupled with the financial crisis that affected every kind of

retailer, meant a hard financial year in 2008: sales plummeted, when DWR’s luxury

goods were suddenly no longer a priority for the upper middle-class consumers Forbes

had targeted in founding and expandingthe Design Within Reach brand.

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By mid 2009, the situation was dire: when stock price fell under the required

minimum, Design Within Reach delisted from the NASDAQ in July. Glenhill Capital, a

private investment firm, purchased 92% of the company for $15 million. Several

months later, Design Within Reach made headlines in Fast Company and The New York

Times for coming under fire in the design community after selling too many knockoffs

and items too “inspired by” modernist originals (See Appendix D, “Example of

Knockoffs”). Brunner had encouraged the push in knockoff production, seeing it as a

quick way to reduce costs and raise revenues by avoiding pesky licensing and exchange

fees.

But the board of DWR believed strongly that Brunner’s poor leadership had

majorly contributed to the company’s recent troubles; in December 2009, he stepped

down, to be replaced in January 2010 by John Edelman, ex-CEO of Edelman

Leather,bringing with him his longtime coworker, John McPhee, as Chief Operating

Officer (COO). Edelman focused himself on two immediate tasks upon arriving in office:

returning to Forbes’ original “in stock and ready to ship” policy, and reviving ties with

the design community, by hosting events and transitioning to the design and sale of

“new originals”—products by prominent designers, made exclusively for DWR. These

“new originals” carried many of the same cost benefits as knockoffs—DWR got a

greater say in the design, and got to choose location of manufacture—typically America

or Asia, rather than Europe. These two actions, along with a generally smoother

management style by Edelman, helped DWR to sink quietly back out of the public eye.

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Today, conditions at Design Within Reach are certainly better. Following

Edelman’s lead, there has been a concerted effort to avoid opening new studio

locations—the pricey long-term leases had kept the company from being able to

maintain the flexibility needed to operate in a volatile market, and the money

(approximately $1 million to open a new studio) can stretch much further when

invested in web improvements. 48 studios remain in operation today, versus 56 in

2006, and 67 in 2008 (See Appendix F, “Studio Locations”).

RECOMMENDATIONS

Design Within Reach should institute a “no knockoff” policy for the products

it carries in its studios, catalogs and online.

It was a massive disappointment to the design community when Design Within

Reach began selling knockoffs. More so than any other major furnishings retailer, DWR

was “built on the designers’ names and stories and reputations, and on this righteous

platform of educating us about them,” and to reproduce pieces, represent them as

originals and sell them at the price of the original was an incredibly unethical move for

the company (Murg). According to Jeff Chu, author of the important “Rise and Fall of

Design Within Reach” article in December 2009, the push came not just from Ray

Brunner’s poor leadership, but “the subtle pressure” of being a public company and

trying to please shareholders—despite DWR being the sort of company that “at its best,

it probably can’t deliver that kind of growth” (Murg).

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And while CEO John Edelman made promises to the design world that Design

Within Reach was no longer going to manufacture knockoffs, he quickly moved to the

“new originals”—the DWR exclusives that gave credit to the designer. And while these

new originals are very much in line with the company’s original goals and values—as

Edelman cited, the modern greats like Charles and Ray Eames became successful,

prominent designers after winning the Museum of Modern Art-sponsored 1948

International Competition for Low-Cost Furniture—it is in Design Within Reach’s best

interest to make the line clearer for customers (and ex-customers) who still remember

the negative press in 2009, and who felt duped when their high design retailer with

high values had faltered.

By making a clear, visible statement that Design Within Reach does not support

the manufacturing or sale of knockoffs, the company can further mend ties with the

design world it abandoned in the 2006-2009 period. Going forward, DWR needs to be

extremely careful that new originals only take a necessary, responsible of inspiration

from the common modern elements, especially those typically tied to one particular

modern designer. The company still holds a huge amount of power and influence in the

modern design world, but it should use that power to be supportive whenever possible,

to make amends for its bully-like behavior in the past, and insure its long-term place in

the industry.

Financial repercussions would be fairly minimal, becausethe company has been

moving away from knockoffs for the last 18 months (Grinspan). Remaining knockoff

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products can be quietly sold off at a discount in DWR’s two outlet locations in Palm

Springs, California and Secaucus, New Jersey. Design Within Reach can now steer its

designers towards working on the new originals—which carry a similar degree of

profitability as knockoffs, but more properly align with the company’s long term goals.

As the company recovers, Design Within Reach should focus on investing in

improvements to the online experience of DWR customers.

Design Within Reach currently co-sponsors a campaign called the 111 Chairs

Project (see Appendix E, “The 111 Chairs Project”). Other co-sponsors, Emeco and

Coca-Cola designed a new version of Emeco’s famous Navy chair, manufactured with

recycled Coca-Cola bottles. The chair uses the same technologically advanced

techniques employed for the regular aluminum Navy chair, is made in America, and has

an obvious focus on sustainability—all trends in the future of the furnishings industry.

DWR sells the product, and launched the online campaign

(http://111navychair.tumblr.com/) which connected 111 members of the design world

with one of the chairs, and had them fill out a friendly survey that gets posted on the

blog. Apart from the minimal costs of running this blog and regular inventory costs

associated with stocking the chair in its warehouse, the only other cost to DWR was the

cost for launch parties for the project in several of its stores across the US—with

beverages provided by Coca-Cola, of course. This low cost project is an example of the

sorts of indirect marketing in which Design Within Reach should constantly be looking

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to take part: it requires minimal investment, demonstrates the company’s interest in

sustainable American design, and has the potential of reaching a new group of younger

design enthusiasts who are just reaching the age and income level to shop at DWR.

In addition, Design Within Reach should continue investing in improvements to

its website (DWR.com) rather than opening new studio locations, which cost

approximately $1 million each to open and stock with floor samples. In the Brunner

period, the company focused on expanding stores as much as possible, while the

website languished, falling behind competitors in terms of its scope and functionality.

While strides have been made with current CEO Edelman at the helm, DWR needs to

keep its focus on moving the website forward. Whether this means carrying web-only

product or vintage products, or finding other ways to improve the functionality of the

site, attention and capital should be focused on DWR.com whenever possible (Chu

“New DWR CEO”). A special task force should be appointed before making any major

financial commitments to upgrade the website. This recommendation does not make

specific suggestions as to where functionality may be improved, but simply suggests

that management adopt a mindset which focuses more greatly on the website, and

takes this into consideration as opportunities arise to open new studios.

Finally, Design Within Reach should make strategic connections with popular

shelter and home blogs and magazines online, and improve and expand existing

connections. These sites, including Dwell, the popular modern home and furnishings

magazine whose motto is “At Home in the Modern World,” and Apartment Therapy, the

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shelter blog empire with popular extensions re-nest, the Kitchn, Unpluggd and

ohdeedoh (which focus on green living, cooking, technology and children, respectively),

reach different audiences than those regularly visiting DWR.com, the official Design

Notes blog, or DWR’s email newsletters (which have a circulation of 300,000 readers).

Apartment Therapy, especially, offers a great bang for DWR’s proverbial buck, for

marketing endeavors. For $8000, DWR can sponsor a post or giveaway on Apartment

Therapy, which will be viewed by approximately 5 million readers—close to the 6 million

who receive DWR’s catalog each year, but at a much lower cost per view (“Custom”). It

is absolutely in Design Within Reach’s best interest to invest in these activities several

times per year, as an inexpensive way of reconnecting with and educating the upper

middle class consumer who first made the DWR successful.

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Appendix A: Selected Financial Data (FY 2008)

Statements of Operations

Data: Fiscal Years (1)

(amounts in thousands, except per share data)

2008 2007 2006 2005 2004

Net sales $ 178,90

3 $ 193,936 $ 178,142 $ 158,236 $ 120,59

8Cost of sales

100,798 107,014 103,681 90,400 65,077

Gross margin 78,105 86,922 74,461 67,836 55,521

Selling, general and administrative expenses

92,435 87,651 87,555 71,422 49,507

Facility relocation costs (2) — — — — 198

Income (loss) from operations (14,330) (729) (13,094) (3,586) 5,816

Other income (expense), net (238) 1,778 212 568 242

Income (loss) before income taxes

(14,568) 1,049 (12,882) (3,018) 6,058

Income tax expense (benefit) 9,417 726 (4,593) (949) 2,314

Net income (loss) available to common stockholders

$ (23,985) $ 323 $ (8,289) $ (2,069) $ 3,744

Net income (loss) per share (3)

Basic $ (1.66) $ 0.02 $ (0.58) $ (0.15) $ 0.46

Diluted $ (1.66) $ 0.02 $ (0.58) $ (0.15) $ 0.29

Weighted average shares used to compute net income (loss) per share:

Basic 14,465 14,430 14,342 13,729 8,177

Diluted 14,465 14,544 14,342 13,729 13,128

Balance Sheet Data:

As of

(amounts in thousands)

January 3,

2009

December 29,

2007

December 30,

2006

December 31,

2005

January 1,

2005 Cash and cash equivalents

$ 8,684 $ 5,651 $ 6,795 $ 3,428 $ 1,075Investments

— — — 9,652 25,517Working capital

9,491 24,210 20,451 25,030 28,882Total assets

76,152 82,424 82,194 86,206 74,620Total indebtedness

14,426 667 1,105 136 1,305Accumulated earnings (deficit)

(32,866) (8,881) (9,100) (811) 1,258Total stockholders’ equity

27,622 50,352 47,763 53,542 48,002

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Appendix B: Financial Statements (FY 2008)

Design Within Reach, Inc.

Balance Sheets (amounts in thousands, except per share data)

January 3,

2009 December 29,

2007 ASSETS

Current assets

Cash and cash equivalents $ 8,684 $ 5,651

Inventory 36,596 37,820 Accounts receivable (less allowance for doubtful accounts of $164 and $264, respectively) 1,762 1,176

Prepaid catalog costs 708 2,101 Deferred income taxes — 1,251 Other current assets 3,675 1,986

Total current assets 51,425 49,985 Property and equipment, net 23,702 23,302 Deferred income taxes, net — 8,182 Other non-current assets 1,025 955

Total assets $ 76,152 $ 82,424

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable $ 16,978 $ 14,442 Accrued expenses 4,455 4,500 Accrued compensation 1,945 2,765 Deferred revenue 1,162 325 Customer deposits and other liabilities 3,191 3,397 Borrowings under loan agreement 13,949 — Long-term debt and capital leases, current portion 254 346

Total current liabilities 41,934 25,775 Deferred rent and lease incentives 6,373 5,976 Long-term debt, net of current portion 223 321

Total liabilities 48,530 32,072

Commitments and Contingencies (Note 7)

Stockholders’ equity

Preferred stock – $0.001 par value; 10,000 shares

authorized; no shares issued and outstanding — —

Common stock – $0.001 par value; authorized 30,000 shares;

issued and outstanding, 14,480 and 14,455 shares 14 14 Additional paid-in capital 60,585 59,146 Accumulated other comprehensive income (111) 73 Accumulated deficit (32,866) (8,881)

Total stockholders’ equity 27,622 50,352

Total liabilities and stockholders’ equity $ 76,152 $ 82,424

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Design Within Reach, Inc. Statements of Operations

(amounts in thousands, except per share data)

Fiscal Years 2008 2007 2006 Net sales $ 178,903 $ 193,936 $ 178,142 Cost of sales 100,798 107,014 103,681

Gross margin 78,105 86,922 74,461 Selling, general and administrative expenses 92,435 87,651 87,555

Loss from operations (14,330) (729) (13,094)Interest income 182 385 307 Interest expense (321) (625) (252)Other income (expense), net (99) 2,018 157

Income (loss) before income taxes (14,568) 1,049 (12,882)Income tax expense (benefit) 9,417 726 (4,593)

Net income (loss) $ (23,985) $ 323 $ (8,289)

Net income (loss) per share:

Basic

$ (1.66) $ 0.02 $ (0.58)Diluted

$ (1.66) $ 0.02 $ (0.58)Weighted average shares used in calculation of net income (loss) per share:

Basic 14,465 14,430 14,342

Diluted 14,465 14,544 14,342

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Design Within Reach, Inc. Statements of Stockholders’ Equity and Comprehensive Income (Loss)

(amounts in thousands)

Additional Paid-in Capital

Deferred Stock-based

Compensation

Accumulated Other

Comprehensive Income (Loss)

Accumulated Earnings (Deficit)

Total Stockholder

s’ Equity

Common Stock

Shares Amoun

t

Balance—December 31, 2005

14,042 $

14 $

55,756 $

(628) $

(789) $

(811) $

53,542

Stock based compensation — — 1,926 — — — 1,926

Issuance of common stock from exercise of stock options 363 — 341 — — — 341

Issuance of common stock from stock purchase plan 8 — 44 — — — 44

Accounting change from stock based compensation — — (628) 628 — — —

Tax benefit from employee equity incentive plans — — (590) — — — (590)

Comprehensive (loss):

Net (loss) — — — — — (8,289) (8,289)Net gain on foreign currency cash flow hedges — — — — 789 — 789

Comprehensive (loss)

(7,500)


14,413 14 56,849 — — (9,100) 47,763

Cumulative effect of adoption of FIN 48 — —

— — (104) (104)



Tax impact from cancelation of non-qualified stock options — — (15) — — — (15)

Comprehensive income:

Net income — — — — — 323 323 Net gain on foreign currency cash flow hedges — — — — 73 — 73

Comprehensi

396

19

ve income


14,455 14 59,146 — 73 (8,881) 50,352



Issuance of common stock from stock purchase plan 16 — 31 — — — 31

Tax impact from cancelation of non-qualified stock options — — (59) — — — (59)

Comprehensive (loss):

Net (loss) — — — — — (23,985) (23,985)Net (loss) on foreign currency cash flow hedges — — — — (184) — (184)

Comprehensive (loss)

(24,169)

Balance—January 3, 2009

14,480 $ 14 $ 60,585 $ — $ (111) $ (32,866) $ 27,622

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Design Within Reach, Inc.

Statements of Cash Flows

(amounts in thousands) Fiscal Years

2008 2007 2006

Cash flows from operating activities: Net income (loss) $ (23,985) $ 323 $ (8,289)Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 6,252 7,090 8,919 Stock-based compensation 1,458 2,272 1,926 Impairment of long-lived assets 268 — — Loss on the sale/disposal of long-lived assets — 48 180 Provision for doubtful accounts 56 (120) 131 Amortization of bond premium — — 2 Deferred income taxes 9,433 728 (2,453)Tax impact from cancelation of non-qualified stock options (59) (15) —

Changes in assets and liabilities: Inventory 1,224 (3,971) (2,610)Accounts receivable (642) 1,458 (1,077)Prepaid catalog costs 1,393 (1,055) 191 Other assets (1,869) 420 1,516 Accounts payable 2,593 (2,742) (376)Accrued expenses 175 113 (202)Accrued compensation (820) 320 906 Deferred revenue 837 (1,258) (107)Customer deposits and other liabilities (317) 1,055 742 Deferred rent and lease incentives 397 396 1,110

Net cash provided by (used in) operating activities (3,606) 5,062 509

Cash flows from investing activities:

Purchase of property and equipment (6,974) (5,688) (8,128)Proceeds from sales of property and equipment — 3 19 Purchases of investments — — (15,275)Sales of investments — — 24,925

Net cash provided by (used in) investing activities (6,974) (5,685) 1,541

Cash flows from financing activities:

Proceeds from issuance of common stock, net of expenses 40 40 385 Net borrowings under loan agreement 13,949 — 1,068 Repayments of long-term obligations (376) (561) (136)

Net cash provided by (used in) financing activities 13,613 (521) 1,317

Net increase (decrease) in cash and cash equivalents 3,033 (1,144) 3,367

21

Cash and cash equivalents at beginning of period 5,651 6,795 3,428

Cash and cash equivalents at end of the period $ 8,684 $ 5,651 $ 6,795

Supplemental disclosure of cash flow information Cash paid during the period for:

Income taxes paid (refunded) $ 297 $ 76 $ (1,985)Interest paid $ 357 $ 657 $ 250

Non-cash investing and financing activities: Capital lease obligations incurred $ 186 $ 123 $ — Gain (loss) on fair value of derivatives $ (51) $ 51 $ (262)

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Appendix C: SWOT Analysis

Strengths - Strong brand authority - Integrated sales points - Distinctive merchandising - Strategic designer, manufacturer and distributor relationships - Superior customer service - Re-stabilized since 2009; costs are under control again

Weaknesses - Dependence on strong economic conditions and consumers’ willingness to spend discretionary income - Major issues (corporate, financial, design) in 2008-2009 are still plaguing company - Still trying to catch up with retailers who made a smoother transition from catalog to online retailing - Many fixed, long-term costs associated with studio-based retailing

Opportunities - Job market growing/stabilizing since peak of the financial crisis, and as a result, consumer spending slowly rebounding - Trend towards American and/or sustainably-made products (and willingness to pay a premium for them) - Growing interest in home design, especially online

Threats - Extremely competitive market - Consumer spending and housing market still nowhere near pre-2008 levels

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Appendix D: Examples of Knockoffs from “The Rise and Fall of Design Within

Reach,” Fast Company, December 2009

24

Appendix E: The 111 Chairs Project (http://111navychair.tumblr.com/

25

(Screen captures from 111chairs.tumblr.com, Event photo

fromhttp://contessanally.blogspot.com/2010/05/live-from-new-york-design-within

reach.html)

26

Appendix F: 2011 Design Within Reach Locations (from DWR.com)

27

Appendix G: The Studio Model

Studios comprise a third of Design Within Reach’s integrated sales strategy; the

other parts of this strategy are the catalog and company website (DWR.com). Ray

Forbes opened DWR’s first studio in San Francisco in 2000, a year after the company’s

first catalog release. Studios are located in major cities and design hubs across the

United States, typically in historical storefront locations of 1200 to 11,000 square feet

with moderate rental rates and long-term leases.

Studios allow customers to see products featured in the catalog and on the

website in person, and speak with the store’s manager, referred to as the “proprietor”,

or one of the two or three sales associates in store at any given time. The studios are

designed simply and cleanly, highlighting the architectural details of the historical

spaces, and of the merchandise itself, marked with well-designed, minimalist signage

that helps to educate the customer about the product and its designer. One of the

trademarks of each store is the “Chair Wall,” which contains many of the company’s

popular chairs on risers that reach the ceiling (Design Within Reach).

Studios only carry floor samples—all customers are required to order through the

company’s centralized shipping location in Hebron, Kentucky. This allows DWR to

reduce studio costs, and customers are typically receptive to the company’s “in stock

and ready to ship” policy in the Kentucky warehouse, which promises to ship within 48

hours of an order.

According to the 2009 financial statements from Design Within Reach, the initial

investment to open a studio is $1,000,000, and studios open for the full twelve months

(Design Within Reach).

Even as DWR focuses on improving their online platform and moves away from

physical expansion, studios still play an important role in forming customer experience

in major cities and design hubs, not just as a showroom, but as a location for the

company to host design-related events (Design Within Reach).

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A typical “Chair Wall” (photo from http://cathiehong.wordpress.com/)

29

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Documents

Design Within Reach: Strategic Analysis and Recommendations